Unusual Options Activity: Workday (WDAY)

Office workflow software giant Workday (WDAY) is up 6% over the past year, far underperforming the overall market. Shares have been trending lower since late February, and one trader sees that trend continuing in the coming months.

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  • That’s based on the July $210 puts. With 51 days until expiration, 11,397 contracts traded compared to a prior open interest of 343, for a 33-fold rise in volume on the trade. The buyer of the puts paid $3.85 to make the bearish bet.

    Workday shares recently traded for about $220, so they would need to drop by $10, or less than 5%, for the option to move in-the-money. The strike price is well over the company’s 52-week low of $192.68.

    Besides sliding lower in recent months, shares dropped 15% last Friday as the company warned on potential sales, giving a slowing economy and large companies continuing to announce layoffs.

    Action to take: With shares still in a downtrend and the company warning on dangers, there may be further downside for shares in the months ahead.

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  • Interested investors should wait for the declining to stop and for signs of a turnaround before buying.

    For traders, the July $220 calls could see mid-double-digit returns or better in the short-term, given the potential for shares to trend lower in the coming weeks.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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